Recent studies have shown that the mevalonate pathway plays an important role in skeletal metabolism. Statins stimulate bone morphogenetic proteins-2 (BMP-2) production in osteoblasts, implicating a possible beneficial role for statins in promoting anabolic effects on bone. Here, we investigated the effects of a lipophilic simvastatin on osteoblast differentiation using mouse myoblast C2C12 cells, in the presence of tumor necrosis factor-alpha (TNF-alpha), an inflammatory cytokine that inhibits osteogenesis. The addition of TNF-alpha to C2C12 cells suppressed the BMP-2-induced expression of key osteoblastic markers including Runx2 and alkaline phosphatase (ALP) activity. Simvastatin had no independent effects on Runx2 and alkaline phosphatase activity; however, it reversed the suppressive effects of TNF-alpha. The ability of simvastatin to reverse TNF-alpha inhibition of BMP-induced Smad1,5,8 phosphorylation and Id-1 promoter activity suggests the involvement of Smad signaling pathway in simvastatin action. In addition, cDNA array analysis revealed that simvastatin increased expression levels of Smads in C2C12 cells exposed to TNF-alpha that also activated mitogen-activated protein kinase (MAPK) signaling pathways, including extracellular signal-regulated kinase 1/2 (ERK1/2), P38, and stress-activated protein kinase/c-Jun NH2-terminal kinase (SAPK/JNK). Simvastatin potently suppressed TNF-alpha-induced phosphorylation of ERK1/2 and SAPK/JNK by inhibiting TNF-alpha-induced membrane localization of Ras and RhoA. Farnesyl pyrophosphate (FPP) and geranylgeranyl pyrophosphate (GGPP) reversed the simvastatin effects on TNF-alpha-induced activation of Ras/Rho/MAPK pathways. FPP and GGPP also restored the simvastatin effects on TNF-alpha-induced suppression of Runx2 and ALP activity. In addition, simvastatin decreased the expression levels of TNF type-1 and -2 receptor mRNAs. Collectively, simvastatin supports BMP-induced osteoblast differentiation through antagonizing TNF-alpha-to-Ras/Rho/MAPK pathway and augmenting BMP-Smad signaling, suggesting a potential usage of statins to ameliorate inflammatory bone damage.